It’s been an unusually tough few months for Big Telecom. The industry, which enjoys a generally friendly regulatory climate, has plenty of influence in Congress and with state and local governments across the country.

On three big issues, however, the outlook is fairly grim for America’s biggest telecom companies. First, the proposed merger between Comcast and TWC, the two largest wired broadband providers in the nation, has come under increasing scrutiny from regulators, consumer rights advocates and many others – who argue that the merger would create an effective monopoly on consumer broadband in a market already bereft of meaningful competition.

The FCC, prompted by recent comments by President Barack Obama, has also indicated that it may strike down state and local laws that restrict the ability of municipalities to create their own broadband networks – laws that the industry has worked hard to help pass. Their removal could clear the way for publicly backed competitors in many local markets.

Finally, and perhaps most importantly, the long-running public debate over whether high-speed broadband is a public utility is heading for a decision in favor of the “yes it is” camp – which is made up of, essentially, all stakeholders but the cable companies themselves, who fear increased regulatory oversight under Title II of the Telecommunications Act. The FCC announced yesterday that the new proposed rules would classify broadband services as a public utility, which would uphold generally agreed Net Neutrality principles and ban paid traffic prioritization.

None of these negative outcomes have yet come to pass, of course – AT&T has already threatened to file suit over any proposed reclassification, and the industry in general is likely to wage a scorched-earth legal campaign against Title II. The Comcast/TWC merger may yet be approved by U.S. regulators, and the FCC efforts on behalf of municipal networks could be torpedoed by additional legal warfare.

But the winds, currently, are blowing against the telecom industry, not for it. So, if the weather holds, what does it all mean for business users?

The Merger

According to experts like IDC’s Courtney Munroe, landline providers like Comcast and TWC aren’t the biggest players in the enterprise market, taking a back seat to Verizon, AT&T and Level 3.

“I think you’re going to continue seeing them going up-market, they’re adding new business services to their portfolio like VPN, managed services, cloud services,” he said. “So they’re slowly but surely inching up into that regional mid-market area and looking for some national deals eventually as well, but that’s gonna be a little further down the road.”

While consumer advocates warn of price hikes, further limitations on choice and other major issues to come if the proposed merger occurs, Munroe asserts that Comcast and TWC still lag behind the competition where business services are concerned.

“They do have VPN, they do offer some of these things, but they don’t have the sophistication that a Verizon, AT&T or a Level 3 can offer yet. But I think that’s something that they’re steadily working on,” he said.

Muni broadband

Municipal broadband or fiber networks could provide additional competition for the telecom industry, protected as it has been for years by restrictive state and local laws that guarantee effective service monopolies.

The competition, however, is sometimes seen as merely a spur to telecom investment, rather than a meaningful alternative to private industry’s services.

“The endgame is not really to empower each municipal authority to have its own network – I’m not sure that’s quite sustainable long-term,” said Munroe. “It might be easy to say ‘put some fiber in the ground,’ but you have to maintain that, you have to keep up with technology, and it’s not easy for municipals to compete with these big telcos, whether it’s cable company telcos or increasingly, people like Google.”

In short, most businesses aren’t likely to be directly affected by the municipal broadband issues, though they will bear keeping an eye on.

Title II

The biggest and most hotly contested issue, however, is Title II regulation, which the FCC looks likely to impose on broadband services over the fierce objections of the industry.

Shira Enstrom, an analyst with IHS, said that the industry is afraid of being over-regulated, which could limit its ability to offer certain kinds of services important for future businesses. Paid prioritization, in particular, is the obvious sticking point.

“What happens to those ‘connected services’ if the operator isn’t allowed to do any sort of prioritization? “How do you deliver a telemedicine service, for example, to a remote facility where the cost of a private line is prohibitive?”

Though it’s far from clear that this type of service would be scuttled under Title II – for his part, Munroe predicts that the FCC’s enforcement of such rules wouldn’t be too heavy-handed, and the proposed guidelines include provision for “reasonable network management.”

Enstrom argued that the effect of Title II regulation could be to limit the options available to business customers.

“I think it could have a chilling effect on the service options that operators are able to offer to address the SMB and enterprise markets, either directly or through partners,” she said.

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